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Your Business

News/Business. A focus on issues facing small business in the United States.

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00:29:59

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ac3

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1080

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Kathleen 11, Us 5, Jeremy 3, Ios 3, New York City 3, New York 2, Brooklyn 2, Southampton 2, Msnbc 2, Lance 2, Babson College 1, Boston 1, Nausea 1, Virginia 1, Apple Alumni 1, An American Express 1, Broccoli Alfredo 1, Yay 1, Founders 1, Blog 1,
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  MSNBC    Your Business    News/Business. A focus on issues  
   facing small business in the United States.  

    February 2, 2013
    2:30 - 2:59am PST  

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she shared her cookies with business partners and then the cookie crumbled. plus three college friends are climbing the ladder of success and helping neighbors hit hard by hurricane sandy.
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small businesses are revitalizing the economy and american express open is here to help. that's why we're proud to present "your business" on msnbc. hi, there, everyone. i'm j.j. ramberg and welcome to you "your business," the show dedicated to giving advice and tips to help your business grow. this brand probably look familiar to you but you'll never believe the ups and downs these cook wis kennet through after entering into a terrible partnership.
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tate's bake shop is known for these buttery thin crisp chocolate chip cookies. >> my customers know. one less chip in a cookie and i get e-mails. >> they churn out more than 2 million cookies a week. sale of those special treats amount to more than $10 million a year. >> the cookie has to be crisp. if it's not crisp, it's tait's. >> but tait's is kathleen's second bakery business. her first business was an institution in tony hampton's in new york for 18 years until she made a bad decision to form a partnership with a former employee and his brother. that mistake cost her her name, her brand, and her first thriving bakery business. >> they destroyed everything i had from kathleen's bake shop. everything. >> bakes since she was a child kathleen started selling cookies. >> i grew up on a farm here in southampton, and i started
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baking cookies when i was 11 years old. my dad told me that i was old enough to buy my own clothes for school now and that i should bake the cookies and sell them at the farm stand. we didn't continue from a family of money so never you wanted you really had to buy or save for. >> kathleen's bake shop was a success right from the start with a slew of select regular, great press, and a wholesale business that was growing steadily in the new york metropolitan area. she bought a historic building, worked crazy hours making pastries, crew saunlts, cookies, and cakes and was taking care of the financing and marketing and everything else in the business. >> when i was 40, now 20 years in the business, u was getting tired and i would like a little bit less commitment and less stress. >> she had generous offers to buy the business on the table, but she had always promised an accountant working for her that she'd give him the chance to buy
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the company first should she ever decide to sell. he jumped at the opportunity but insisted his brother join the deal. that sense of fairness set her up for a devastating fall. >> the business deal that i made was crazy naive. i didn't have the best lawyer obviously, and the deal was one-third, one-third, one-third. i thought, in my brain, oh, yay, we're all equal, but together they were two-thirds. >> as soon as the deal was done, the brothers started making major changes, diminishing the quality of the ingredients and moving it to virginia. >> before i resigned i had a -- i had gone so far and i gave my word and i thought it wasn't right to back out at the last minute. >> her long-time plea witnessed the dramatic changes firsthand.
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>> i know her standards and the quality they had was not her standard. >> they just continued to kill the quality of the brand. it was heartbreaking and it was embarrassing because my name was on it. and then ultimately after about six months, then they came and fired me. >> a legal battle ensued and when the dust settled, kathleen was saddled with $200,000 of debt from the brothers' short time in control of the business as well as legal fees from the fight. she also lost the kathleen's brand name. the only thing she walked away with was her bakery store front in southampton. she had no choice but to start all over again. >> i had zero money left in the bank and i opened tate's in two weeks because i had to. >> around that time kathleen was introduced to michael, a business adviser for creative entrepreneurs. she told him the whole story and that she was getting ready to sell her home to get some much
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needed capital to fund the new business. >> and i looked at her and i said, do you have a bake shop in do you have a building? she said yes. >> do you have a recipe? she said yes. >> i said you're not selling anything. roll up your sleeves and we'll make it happen. >> how does a entrepreneur open a successful partnership and avoid a misstep like kathleens. he pointed out like keeping 51% of the company so you can have voting control and making sure you have veto power on important decisions written into your contract. >> you're the founder, you're the visionary, they're coming to you. you don't need them. they need you. oftentimes private capital comes in. it's great vision, great idea, beautiful placement in the market and all of a sudden they just want to make millions so they come in and they totally destroy it and you lose your brand. >> with michael's guidance and the emotional chapter of
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kathleen's bake shop behind them, tats has catapulted to a much bigger brand than kathleen's ever was by focusing on the cookie business. >> it's an all american story, you grow up on the farjs start baking cookies, you get successful, get knocked down and you're back and you're roaring. >> kathleen says now the whole ordeal was worth it and in many ways it's the best thing that could have happened. >> when you go through something very challenging that tests all your limits, everything becomes easy. i don't have any fear to take chances because what's the worst that could happen? i've already lost everything before. can you imagine losing your business? even one with your name attached to it all because you chose the wrong business partner? so how can you avoid this? well, we have a great panel to discuss this here today. brian cohen is here on the set with is a chairman of new york
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angel, a group that has invested more than $50 million in 70 early-stage technology companies and he's the ceo of launch dot. and he is an author of new books, the latest a.p.e., author, publisher, entrepreneur. great to see you guys. >> you, too. >> you were sitting on the set and you were both shaking your heads, one-third, one-third, one-third. her adviser said keep 51%. it's as easy as that, right? >> no, it's not. it depends on what kind of business it is. i'm unusual in that i married my partner. she challenged me all the time. she was 50% and i was 50%. we both went into it with that
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50% trust. that isn't normal because they're always trying to sort of figure each other out. think the nature of the success of great partnership is when you go into it with an internet -- in tell length -- a rigor, a rigor that you want too challenge each other, a rigor that says what can you add to the business every day? >> you know, guy, you're in business with your wife, brian and i'm in business with my brother. i trust in him infinitely and he in me. what can do you to protect yourself? >> well, i think in many regards, protection is somewhat of an illusion. it's all about doing the due diligence and investigation and trusting your gut at the front end. it's much more difficult to undo a bad situation than to prevent a bad situation. so it's about checking references. in this case, the thought that three people would be equally
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worth one-third i think is somewhat simplistic. it's very unlikely that those other two people were worth two times more than she was. it was her idea, her skill, her recipe, her name, it's her everything. hard to imagine it should have been one-third, one-third, one-third at the beginning under any circumstance. >> you know what e loved at the end, where she said i'm not afraid anymore. what's the worst that can happen? i lose everything? i already lost everything. that's a great thing for an entrepreneur. you could lose everying. >> you could. i'm an optimist. i'm really calculating out what's the person adding to what i'm doing. i don't think companies today, particularly in the world that i spend a lot of times, can operate with one individual because there are so many pieces of it that are required. she had bad advice. it was simple. she never thought to consider what will be the consequences of doing what she was doing, but,
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guy's bringing up the one-third, one-third. certainly have the best lawyer you can find. the one who understands early partnerships and relationships that can happen and the psychology of that, but i am a believer in a team. i don't think anymore in as much as my wife and i built our company together and she challenged me every day, i don't think companies can be built today without great partnerships. >> she mentioned in a piece and you mentioned guy about trusting your gut. how do you know when to trust your gut or do you always trust your gut. a lot of times we say, oh, i'm doing something wrong, i'm in too deep, i don't know if i should change this. a lot of times you shouldn't. how do you u know when to give your gut credence and when not to in. >> well, this won't exactly help kathleen but i have found that what you should always do is you should ask your wife because my historical perspective.
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>> thank you. >> is that your wife has much better judgment for you. this is good advice for men. unfortunately i don't know what to tell women when women are the ceo because i do not recommend they ask their husband. >> it's funny. when people ask me, i say i have a strong feminine side. >> maybe people should call brian and ask him. all right. thanks, you guys. i'm glad this story has a happy endi ending. as you listen to the middle of it it's like a knife in her heart but she pulled through and those cookies are great. thanks so much. we just showed you an example of a partnership gone wrong. now let's look at the opposite. three fraternity brothers who struck a balance when founding the indoor climbing gym indoor boulders. their success can be traced to their friendship. the owners kept the facility open 24 hour as day to house the
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displaced and act as a base for disaster response teams. as we reported a few years back, these college buddies turneded business partners have made the best of tricky times and have become a booming business. in the old days, sports in new york city used to be of the classic variety. but times have changed. this is brooklyn boulders, 20,000 square feet of rock climbing in the heart of the borough. >> it was great that this opened because it was the only place in brooklyn and one of the few places. >> the work is three business partners. going into business with your close friend bs may sound risky, but these guys have figured out,000 make it work. >> this is the promotion we ran. >> they found that a clear division of responsibilities has helped them tackle the
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challenges of managing a startup and avoiding the dramdrama. >> whenever it gets fiery, we always say, friends first, friends first, friends first. >> they wrote a business plan for it while studied entrepreneur ship at babson college. they went their separate ways but realized the idea. >> we realized we had the abilities so we thought, why not go for it. >> jeremy who works for finance in boston came up with the projections for models and he and the others pitched the idea to their family and they brought on a third friend to round out the team. >> we thought, do you want to be part of this, we trust you and i said, yes, i do, but i want equity. >> lance is the operations guy. he can sell anyone anything. great at sales and marketing and p.r. i'm the creative type. i can, you know, ziep and build.
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and jeremy's the financier. so with my vision, jeremy's capabilities, and lance's execution, the roles were just so clearly defined from the very beginning. >> with funding and a management team in place, steven took over the creative responsibilities. he searched around new york city for more than a year before securing a lease on a 100-year-old warehouse in wrook lin that used to house newspaper deriver derivery trucks. lance manages the day-to-day operations where the other two manage everything behind the scenes. >> seeing all the jobs from all the angles makes me the perfect person to assign those jobs and, you know, make this place run like a well oiled machine. >> i've got a very intimate knowledge of the numbers and that certainly helps you figure out quickly if something's going wrong or not. >> while they're each focused
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their specific responsibilities within the business, they all have an eye on the big picture. >> when it comes to what's going to happen over the next five years, the three of us have an input. there's no major decision that's going to get down without the three of us being on exactly the same page. when we come back, seeking out investment capital? you may not be looking in the right places. and our panel discusses which mobile operating system is right for your business. we've all had those moments. when you lost the thing you can't believe you lost. when what you just bought, just broke. or when you have a little trouble a long way from home... as an american express cardmember you can expect some help.
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but what you might not expect, is you can get all this with a prepaid card. spends like cash. feels like membership. it's time now to answer some of your business questions. brian and guy are with us once again. the first one is about seeking advice or investors. >> a small-start company, which is cash flow positive which has an innovative product, what should the company go to to get professional advice from venture capital, from management companies. >> okay, guy. you are in the heart of silicon valley and so you are surrounded by people this guy would like to speak to. how do you get in? >> well, the most important way
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to get in these days is to have a working prototype or product or service that people are already using. in the past you used to raise money in order to build the prototype but today with open-based tools and cloud-based services and marketing features such as google+ and facebook, things are very different. i think they expect you to show up with something that's already working, not just a vision and a key. it's something these ooh already in use. >> this guy has something. it's working. even if he's not looking for money, how do you get advice? oftentimes it's easier to ask for money than advice. >> it's clear to me. get the best lawyer in the business. the lawyers know the ecosystem. in new york city there's handful of lawyers that do this every day. they see who is the trufts worthy, they see who has the money, they see what the system is that they have to go through. hire the best attorney you can find. >> and is that easy?
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>> yeah. they're there. they're certainly overwhelmed because there are so many companies so you're kind of selling them too. they have to believe in you almost as if, in fact, they are investing in you because some of the best attorneys will give you an entrepreneur rate because they believe in you, but that's really the best first step to take. next up, a question about mobile operating systems. >> what do you think the preferred system will be in the future? ios, android, or windows? >> any sense? >> wow. i'm a big apple fan. >> you're a focus group of one. >> i am. i'm an ios guy. i think apple is going to pull a rabbit out of its hat. i think android and google has a lot behind it. they've been able to standardize on that. i'm behind ios. >> guy? >> you may find this hard to believe being an apple alumni. i don't use any ios devices.
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i'm pure android. but to be on a business platform, you to use both, android and ios. at the end of the day, you have to do both. >> all right, okay. probably not the answer he wanted to hear but one that is the reality. and finally this is an e-mail from chris. he says i own an i.t. services company with myself as the only employee. how do i know when it's time to hire my first employee. we get this question a lot actually. how does he know? when he's running out of time? when he's not sleeping? >> i think anybody who asks that question at the time they need it hasn't bmt planning well enough. they should vl thought about it before they started the companile i think if it's in the service business, how do they extend their service time, right? because they're usually charging themselves out an hourly basis. as soon as they see that happen and they extend their team,
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they're going to need somebody or they need more sales, then they need that right salesperson. >> guy, in a case like this, do you suggest hiring an employee or contractor to test it out? >> the conservative step is to hire a contractor just to make sure that your perceived need for more employees is true, but i think once you are sure of that need, you should hire an plea because the advantages of morale and motivation and long-term loyalty are much longer and stronger for an plea versus simply a freelancer or a contractor. >> plus, there's something that goes along, j.j., with hiring a first plea. they're almost founders at that point and you're really looking for somebody who sees clearly what your interests are in a locker term almost in a partner way. so i think you have to find something more special than somebody who's simply doing transaction work for you. >> all right. brian and guy, thank you guys both for letting us pick your brain today.
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we really appreciate it. if any of you have a question for our experts you know what to do. go to our website. once you get there, hit the "ask the show" link. again it's openforum.com/yourbusiness or you can e-mail your questions and comments to that addre address @yourbusiness at m msnbc.com. let's get great idea from small business oerps like you. >> we have a company meeting. i show them the roadmap. we have have a company discussion. it's gotten more challenging. it's tradition we've kept since we were a handful of people and i think that that really keeps the staff engaged, excite. >> have you watched the youtube
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video "gangnam style"? it's usually very unique. don't try to copy others' idea. try to do it based on your unique idea and then you're going to succeed. if you are unique, you can succeed like "gangnam style." chances are your customers or your potential customers are going to look for you online. so here are five ways to build your credibility on the internet, courtesy of smallbiztrends.com. one, great facebook business page. it's likely your customers are going to look for you on facebook. you'll also be able to use it to leverage the many social media benefits within the social network. two, interviews and press. nothing helps your online credibility better than a third party endorsement. so seek out every media opportunity and be sure you have it posted online. three, a maxed out linkedin
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profile. ielt is often one of the first things that comes up in an internet search. make sure your profile is up to date. fourth, a blog. and number five, videos. studies continue to show that video use is on the rise. so make sure you have a video presence online. when we talk about capital for our businesses, we're generally talking about money, about funding, but our next guest says we should not forget about invisible capital, that there are hidden forces that can help to shape entrepreneurial opportunities. chris robb is an entrepreneur. greats to see you. i was telling our viewers that we sat on a panel together and i found what you do so interesting. what is invisible capital. >> essentially what invisible
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capital issering else. >> i gat it. so there's money but as you say, there's your knowledge, your skills, experience, your trade, and, of course, the network, the people that you know. all of these are important to growing your business. >> absolutely. >> and so as we think about how to take advantage of these things. and, look, i might say people that you know, sure, it works for you, you're at princeton, it works for me, i'm at msnbc. i might not know anyone. how do we reframe our own invisible capital. you say one of the first things you think about is privilege. >> there are things we do and other things we should take credit for. i didn't choose to be born into a middle-class family. i was lucky. it helps being a man in a
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male-dominated industry or speak english as a first language. all these things help. they're not enough but they have to be used in a meaningful way. if we don't realize this, we leash assets on the table. >> being a male in a male-dominated industry but you're saying taking a step back and recognizing it is a way to use it? >> right. otherwise they may be invisible to us. sometimes it takes someone else to realize the things we already have but they're hidden in plain sight. so for instance, i don't think about my gender that much, but if you were a 19-year-old woman who wanted to raise money to open up an auto repair shop, people are going to be looking at you irrespective of what skills or knowledge or assumptions you have. we live in a society where there's very few 19-year-old women starting awe o'ree pair shops shchl e has to recognize that is the perception and she has to think ahead and say how
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do i strategically leverage that i'm not man and think what other resources can i bring to bare to make this a reality. >> then profile. how you're seen by others. >> absolutely. when i show up here, i want to look nice. i project a professional image, the way i speak, comport myself. all those things matter. what matters more is how you perceive me. i may seem very professional and when i walk off the set, you go, who's this guy. >> when i was in business school we had a class called touchy feely. the whole idea was learned how people perceive you. so when i put something out into the world, i may think you're reacting know in a certain way, but when you get in a group of people who are told to be honor evidence, it's interesting how what you perceive is not necessarily what they think. >> absolutely. it's a component of invisible capital. it's not just who knows you but
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what they think of you. >> finally, pride. >> what are you most proud of beyond your technical competency in your business, providing goods and services? separate from that, what do do you really well, really well, actually write that down and look at the list of privilege, pride, profile, and see what connections there are. >> thanks so much, chris. it was great to see you. >> my pleasure. >> while we do a lot of communicating online, still nothing beats a face-to-face meeting when it comes to networking. our app of the week makes meeting up a little bit easier. the "here on business" app links visitor whence they're visiticly nearby. after checking in, you'll get a lit of other users setting up a meeting place and time is easy using the built-in chat feature. to leadership more about today ee show, just click on our website. it's